The S in CSR* and ESG* – Social – Requires more and deeper focus

Today a lot of company owners, management and asset managers in the developed world consider that the Social factors of CSR/ESG analysis are not an issue for their local companies, but rather problematic only for companies in the developing part of the world or emerging markets.

First of all, how important is this?

Well, sustainable activity must take all stakeholders into consideration. The social factors can be split in social and societal. The first is about the company internal social issues, this is organisation, talent handling, He efficiency, diversity, etc. The second is about the external social issues, this is clients, suppliers, local communities, regulators, ets. The social factors hence covers all other stake holders outside the investors of the company, the latter is dealt with in the Governance part. This is important.

Why does many believe this is an emerging market problem and not a problem in the developed world?

Well, most companies in the developed markets tend to focus on their own local operations and spend far to little time on the supply chain. and far too many investors are happy with this limited and incomplete risk consideration of the Social factor. In emerging markets we see drastically works work conditions (and Environmental care taking) for instance and hence many believe this is not a developed world problem.

What need to be done?

When analysing companies in the developed world, we need to look deep into the supply chain as the buyer of a service or products form a company with bad CSR/ESG practice actually cautions it and supports this. Hence, they carry the risk of a story blowing up in social media spreading around the world in minutes.

Easy said, easy done?

As with all thorough research, it requires work and effort. But if you wish to be sure your company’s CSR policy and programs are calibrated for avoiding controversies on this, this work has to be done. the same goes for your investments in companies, if you wish to truly implement SRI, you need to be in control of your ESG factor understanding of the companies you invest in.

And, yes, we can help you in increasing understanding for this in your company or help you implement a process to ensure that this is properlly reflected in your investment processes.

*Corporate Social Responsibility **Environmental, Social and Governance